Phillips curve

This study examined the causal and quantitative relationships between the unemployment rate and the the inflation rate in Bulgaria. А statistical analysis has been performed in order to characterize the relationship between the two economic variables by using monthly and annual data. A comparison has been made with respect to the results obtained for Bulgaria and European Union (28 country). An assessment of the equilibrium level of unemployment (NAIRU) in Bulgaria and in EU-28 has been performed.

We turn our attention to the role of money for determining nominal magnitudes. Using US data, we find that the aggregate “nominal output plus and stock market capitalisation” is closely related to the money stock, lending support to one of Milton Friedman’s key monetarist propositions. This finding should be particularly important for ECB monetary policy: an inflation-free euro plays a

The unemployment rate in Zambia faces the insufferable irony of being a macroeconomic metric of the highest priority but the least effort in measurement for policy, analysis or implementation.Most reports on unemployment in Zambia have been breakdowns of the labour force survey by disaggregating data by sex, occupation, sector, age or some other demographics. This report goes a step further in its analysis and introduces the concept of the Non Accelerating Inflation Rate of Unemployment (NAIRU) and its relevance for policy prescriptions.

Policy-makers have recently noted an apparent flattening of the Phillips curve. The implications of such a change include that a positive output gap would be less inflationary, but the cost of reducing inflation, once established, would increase. This paper’s objective is to review the evidence and possible explanations for the flattening of the Phillips curve in the context of new-Keynesian

Lotta all'inflazione e autonomia della banca centrale, massima concorrenza e minimo intervento dello Stato nell'economia sono i principi chiave dei trattati europei. Questo saggio dimostra che essi esprimono una idea di società in conflitto con quella propria della nostra Costituzione e con la tutela dei diritti fondamentali che questa prevede, a cominciare dal diritto al lavoro. Tale conflitto
è reso evidente dalla forzatura rappresentata dall'inserimento in Costituzione, in obbedienza alle regole europee del Fiscal compact, del nuovo art. 81 che prevede l'obbligo del pareggio di bilancio: un vero e proprio cuneo che scardina il sistema dei fondamentali diritti costituzionali. Contro la logica del "vincolo esterno" che quell'articolo rappresenta è necessario riaffermare la validità dell'impianto originario della nostra Costituzione e la sua priorità sui trattati europei.

John Maynard Keynes once said that according to Lenin there is no surer way of overturning a society than to degrade its currency. Inflationary processes, it is clear, can be very disruptive in the short run, even if they do not cause revolutions. But they also have long lasting effects. Fernand Braudel believed that price revolutions represented the strongest secular pattern in modern history. In fact, over the past eight centuries, the world economy has experienced four major price-revolutions whose inflationary forces ultimately transformed economic and social structures. These four price-revolutions took place approximately in the late medieval period, from 1180 to 1350, after the age of great discoveries in the sixteenth-century, from 1470 to 1650, during the Industrial Revolution era, from 1730 to 1815, and during the twentieth century, from the 1890s to the 1980s (Hackett Fischer, 1996).

Much teaching of intermediate macroeconomics uses the IS-LM-AS or AD-AS approach. This is far removed both from the practice of interest rate setting, inflation-targeting central banks and from the models that are taught in graduate courses. Modern monetary macroeconomics is based on what is increasingly known as the 3-equation New Keynesian model: IS curve, Phillips curve and interest ratebased monetary policy rule (IS-P C-M R). This is the basic analytical structure of Michael Woodford's book Interest and Prices published in 2003 and, for example, of the widely cited paper "The New Keynesian Science of Monetary Policy" by Clarida et al. published in the Journal of Economic Literature in 1999. A recent graduate textbook treatment is Gali . Much of this literature is inaccessible to undergraduates and non-specialists. Our aim is to show how this divide can be bridged in a way that retains the tractability and policy-friendliness of the old approach yet fits the institutional realities of contemporary policy-making and opens the way to the more advanced literature.

The conventional wisdom that inflation and unemployment are unrelated in the long-run implies the compartmentalisation of macroeconomics. While one branch of the literature models inflation dynamics and estimates the unemployment rate compatible with inflation stability, another one determines the real economic factors that drive the natural rate of unemployment. In the context of the new Phillips curve (NPC), we show that frictional growth, i.e. the interplay between lags and growth, generates an inflation-unemployment tradeoff in the long-run. We thus argue that a holistic framework, like the chain reaction theory (CRT), should be used to jointly explain the evolution of inflation and unemployment. A further attraction of the CRT approach is that it provides a synthesis of the traditional structural macroeconometric models and the (structural) vector autoregressions (VARs)

We develop a graphical 3-equation New Keynesian model for macroeconomic analysis to replace the traditional IS-LM-AS model. The new graphical IS-PC-MR model is a simple version of the one commonly used by central banks and captures the forward-looking thinking engaged in by the policy maker. Within a common framework, we compare our model to other monetary-rule based models that are used for teaching and policy analysis. We show that the differences among the models centre on whether the central bank optimizes and on the lag structure in the IS and Phillips curve equations. We highlight the analytical and pedagogical advantages of our preferred model. The model can be used to analyze the consequences of a wide range of macroeconomic shocks, to identify the structural determinants of the coefficients of a Taylor type interest rate rule, and to explain the origin and size of inflation bias.

Paper ini bertujuan untuk menganalisis eksistensi fenomena kurva Phillips di perekonomian Indonesia, 2000Q1-2010Q3. Hasil penaksiran yang diperoleh dengan menggunakan metode OLS menunjukkan bahwa model expectationss augmented Phillips curve dan new Keynesian Phillips curve tidak dapat memberikan gambaran yang jelas mengenai eksistensi kurva Phillips di perekonomian Indonesia. Variabel guncangan seperti persentase perubahan kurs dan harga minyak mentah memberikan pengaruh yang sangat kecil terhadap tingkat inflasi di Indonesia. Selanjutnya, hasil penaksiran dengan menggunakan metode GMM pada hybrid model dari new Keynesian Phillips curve menunjukkan bahwa fenomena kurva Phillips eksis di perekonomian Indonesia.

Both common macroeconomic shocks and country-specific developments have subjected the flexibility of wage setting mechanisms in the euro area to a stress test in recent years. Against this background, this paper takes a fresh look at wage flexibility in EMU and attempts to draw a few lessons from the experience of the early years. First, we set the stage for the analysis by providing a brief description of the stylised facts regarding nominal and real wage and unit labour cost developments in the euro area over the recent business cycle. Then, the paper presents an empirical assessment of wage inertia based on new econometric estimates of a Phillips-curve type wage equation across euro area countries and offers an interpretation of the main findings with respect to nominal and real wage flexibility. Finally, we investigate the cyclical responsiveness of relative competitive positions among euro area countries. We conclude that from a bird's eye perspective euro area wage and labour cost dynamics have been quite benign in the past couple of years. However, our estimates suggest that persistent cross-country differences in wage and labour cost developments have not always reflected warranted adjustment needs; they are rather indicative of an eventually insufficient degree of nominal and real wage flexibility in the euro area.

Equilibrium growth rate stated by us is based on equilibrium evolution of economy IS-LM-SRAS, where the equations IS and LM are liniar specificated in real GDP, nominal interest rate and real wealth, and the SRAS curve is also linear, infered from linear Phillips curve. The evolution of the economy is determined from two dynamic continuous time equations: the dynamics of expected inflation rate, specified as adaptive mechanism with respect to current inflation rate, and the wealth dynamics, the last arising from the policy of budget deficit finance. As a consequence, the dynamics of economy depends on the policies of the government and the Central Bank. The paper comprises three parts: the dynamic model deduction, long run and short run dynamics of the economy, money finance debt, when b b t = policy is applied, deduction of the equilibrium growth rate for this policy.

RESUMEN
El presente trabajo estima la curva de Phillips para México mediante el uso de variables que son determinantes para la inflación. Se realiza un análisis de series de tiempo, utilizando el método de regresión simple mediante mínimos cuadrados ordinarios. Los resultados que se obtienen mediante el modelo estimado nos hablan de una relación inversa de la inflación con el desempleo y el tipo de cambio nominal. Del mismo modo, podemos decir que la inflación mantiene una relación positiva con la brecha del producto y con la misma inflación rezagada en un año. Además, el modelo analizado puede ser utilizado como un modelo predictor de la inflación.

ABSTRACT
This paper estimates the Phillips curve for Mexico through the use of variables that are determinants for inflation. A time series analysis is performed, using the simple regression method using certain ordinary squares. The results obtained through the estimated model tell us about an inverse relationship of inflation with unemployment and the nominal exchange rate. In the same way, we can say that inflation maintains a positive relationship with the product gap and with the same inflation lagged in a year. In addition, the analyzed model can be used as a predictive model of infection.

In this investigative article is a study or more accurately an application of the classical theory of the relation between inflation and unemployment rate for Colombia being the second dependent variable from the first called Phillips curve.

This estimation is carried out through a system of simultaneous equations in a VAR model, using monthly data from
2001 to 2012 obtained from the National Administrative Department of Statistics (DANE), to verify the endogeneity of the variables included in the model and in relation to it will be an econometric analysis in order to give a prognosis and impulse response analysis of the variables, where the main results were a long-term dependence of variables and little significance in short-term lags.

The paper examines two different aspects of macroeconomic behavior in the United States during the period between 1929 and 1941 --both the proximate determinants of the severity and duration of the slump in nominal income, and the factors influencing the division of those changes in nominal income between changes in the price level and in real output. The first question, the sources of nominal-income movements, has been the subject of much recent controversy and debate. the statistical analysis in the paper suggests that both extreme monetarist and nonmonetarist interpretations of the decade of the 1930s are unsatisfactory and leave interesting features of the data unexplained. The paper takes the intermediate view that both monetary and nonmonetary factors were important, and places considerable emphasis on the interaction among construction, consumption, the stock market, and the Hawley-Smoot tariff, in its explanation of the severity of the first two years of the contraction.

The purpose of this paper is to investigate the relationship between inflation and unemployment rate, in the case of Poland over the period 1992-2017, within the Phillips curve context. For the long-term equilibrium relationship and the causal relationship of the examined variables, the Autoregressive Distributed Lag (ARDL) technique developed by Pesaran et al. (2001) and the causality approach of Toda and Yamamoto (1995) are applied, as the most appropriate for the
sample size and the integration of the variables. The results of the study revealed that there is a long run relation between unemployment rate and the inflation rate for Poland, for the aforementioned period. In addition, the causality results indicated a unidirectional relationship
between unemployment rate and inflation rate, with direction from unemployment to inflation. Finally, to forecast the model variables, the impulse response functions and the variance decomposition method are applied. The results for a 10-year forecasting period indicated that
shocks in unemployment rate cause a decrease on inflation rate for the first years, followed by a steady increase for the remaining years. Policy implications are then explored in the conclusions.

This paper pursues a computationally intensive approach to generate future inflation, followed by an exploration of the determinants of inflation expectations by estimating a new Keynesian type Phillips curve that takes into account country-specific characteristics, the stance of monetary and fiscal policies, marginal costs and exogenous supply shocks. The empirical results indicate that high and climbing inflation could easily seep

This paper presents a theoretical explanation for the enigmatic discontinuity of the relationship between inflation and unemployment that has registered the U.S. economy since the early 1950s onwards. I argue that by distinguishing between two different historical episodes after World War II, the Golden Age and the Age of Decline, some insights in the Phillips curve puzzle can be gained and the analysis helps us to substantiate the existence of both downward sloping and upward sloping species of the curve. The regime change is illustrated here by building on a commonly used Post-Keynesian model of distribution and growth, which is enhanced to allow for an inflation process based on a conflicting claims approach and a growth rate form of Okun's law. The model shows that the long-run Phillips curve can be either downward-sloping or upward-sloping, conditioned to the distribution of market power between business and labor.

The purpose of this paper is to investigate the relationship between inflation and unemployment rate, in the case of Poland over the period 1992-2017, within the Phillips curve context. Several econometric techniques are applied, including the bounds testing (ARDL) approach developed by Pesaran et al. (2001) as well as Toda and Yamamoto (1995) modification of the Granger causality test (no-causality approach) in a two-variable vector autoregression (VAR) model. The results of the study confirm a long run relationship among the examined variables for the aforementioned period. Finally, the findings of Toda and Yamamoto (1995) analysis indicate a unidirectional causality between unemployment rate and inflation with direction from unemployment rate to inflation. Policy implications are then explored in the conclusions.

We evaluate the role of oil prices shocks in explaining inflation dynamics in the post war US period. In doing so, we use the second order solution of a benchmark New Keynesian framework when the economy is hit by an oil price shock. The second order solution permits us to relax the certainty equivalence assumption generating a risk-premium over inflation absent in a log-linear approximation. We find , in contrast with Clarida Galí and Gertler (QJE, 2000), that oil price shocks rather than differences in the monetary policy rules between the pre-Volcker and post-Volcker periods, are the main driving forces that explain high and persistent levels of inflation during the 70´s. The mechanism works as follows: an increase in the volatility of oil prices fits into the marginal costs of firms through the production function and increases output volatility in equilibrium. The convexity of the Phillips curve is crucial to generate an increasing function between the volatility of output and ...

The first step in any kind of research is to select the most adequate research methodology. There are a lot of research methodologies to chose from when one wants to engage in research regarding the development of financial performance models. Because of this abundance, there is a need to present the most important ones. In this paper I describe the

High economic growth, price stability and low unemployment are the most enviable macroeconomic goals. The success of government policies is reflected in low inflation and low unemployment. The nature and costs of inflation and unemployment can have vital impact on the economy and society. Unemployment situation in Pakistan has aggravated because of rapid population growth, lacklustre economic growth, fiscal indiscipline,

We evaluate the role of oil prices shocks in explaining inflation dynamics in the post war US period. In doing so, we use the second order solution of a benchmark New Keynesian framework when the economy is hit by an oil price shock. The second order solution permits us to relax the certainty equivalence assumption generating a risk-premium over inflation absent in a log-linear approximation. We find , in contrast with Clarida Galí and Gertler (QJE, 2000), that oil price shocks rather than differences in the monetary policy rules between the pre-Volcker and post-Volcker periods, are the main driving forces that explain high and persistent levels of inflation during the 70´s. The mechanism works as follows: an increase in the volatility of oil prices fits into the marginal costs of firms through the production function and increases output volatility in equilibrium. The convexity of the Phillips curve is crucial to generate an increasing function between the volatility of output and expected inflation. Intuitively, a more volatile marginal costs lead to forward looking firms to set ex-ante a higher price level in response to an increase in oil price volatility. From a normative point of view, we show that with a CES production function in oil and labor-input along with distorted steady state, the model can generate a timevarying endogenous trade-off between inflation and deviations of output from its efficient level without any need of real imperfections. The previous trade-off, once uncertainty is taking into account, implies that a positive inflation risk premium is optimal in response to oil price shocks.

This paper describes a Rational Expectations Model of the Spanish economy, REMS, which is in the tradition of small open economy dynamic general equilibrium models, with a strongly microfounded system of equations. The model is built on standard elements, but incorporates some distinctive features to provide an accurate description of the Spanish economy. We contribute to the existing models of the Spanish economy by adding search and matching rigidities to a small open economy framework. Our model also incorporates habits in consumption and rule-of-thumb households. As Spain is a member of EMU, we model the interaction between a small open economy and monetary policy in a monetary union. The model is primarily constructed to serve as a simulation tool at the Spanish Ministry of Economic Affairs and Finance. As such, it provides a great deal of information regarding the transmission of policy shocks to economic outcomes. The paper describes the structure of the model in detail, as well as the estimation and calibration technique and some examples of simulations.

Nowadays, the relationship between inflation and unemployment is known as the Phillips curve. Since this curve is an important indicator of the economic relationship between the unemployment and inflation, much attention has been paid to it. Phillips showed an inverse relationship between unemployment and wage rates being paid, so that the decline in the unemployment rate leads to an increase in wage rates or prices. In this study, we estimate the Phillips curve for inflation and unemployment rates in Iran by using a time series data from 1996-2012 and by using comparative method. We conclude that this model can be either logarithmiclinear or linear-logarithmic best model to the Phillips curve in Iran.

Este trabajo de investigación expone un acercamiento teórico y empírico sobre el ciclo económico mexicano en base a la Curva de Phillips, mediante un marco teórico que justifica el planteamiento de la NAIRU y dos modelos econométricos que muestran la relación entre la inflación y el desempleo así como una estimación de la NAIRU del 2000 al 2014. Así mismo se presenta un breve análisis impulso respuesta que permite observar la relación tanto del proceso inflacionario mexicano y el desempleo con el comportamiento del reloj cíclico publicado por el INEGI.
The following paper exposes a theoretical and empirical approach to the Mexican Economic cycle, based on the Phillip´s Curve, under first a theoretical intercourse that justifies the NAIRU exposure and two econometric models that describe the relationship between inflation and unemployment, including an NAIRU estimation from 2000 to 2014. Also in this paper, an impulse-response is exposed in orther to observe the relation of causality that the inflation and unemployment have to the economic cycle clock published by the INEGI.

The low unemployment/low inflation environment of the 1990s has spawned a resurgence of interest in the economy's natural rate of unemployment. This paper develops time-varying natural rate estimates by using the Okun's Law relationship between employment and output. The estimates are robust to alternative measures of the business cycle, and differ qualitatively and quantitatively from estimates of the NAIRU, which are typically backed out of a reduced-form Phillips curve. Despite these differences, natural rate estimates display similar utility in forecasting inflation as NAIRU estimates derived from the past history of inflation itself.

The canonical new Keynesian Phillips Curve has become a standard component of models designed for monetary policy analysis. However, in the basic new Keynesian model, there is no unemployment, all variation in labor input occurs along the intensive hours margin, and the driving variable for inflation depends on workers' marginal rates of substitution between leisure and consumption. In this paper, we incorporate a theory of unemployment into the new Keynesian theory of inflation and empirically test its implications for inflation dynamics. We show how a traditional Phillips curve linking inflation and unemployment can be derived and how the elasticity of inflation with respect to unemployment depends on structural characteristics of the labor market such as the matching technology that pairs vacancies with unemployed workers. We estimate on US data the Phillips curve generated by the model, and derive the implied marginal cost measure driving inflation dynamics. JEL: E52, E58, J64

This paper addresses the various methodological issues surrounding vector autoregressions, simultaneous equations, and chain reactions, and provides new evidence on the long-run inflation-unemployment tradeoff in the US. It is argued that money growth is a superior indicator of the monetary environment than the federal funds rate and, thus, the focus is on the inflation/unemployment responses to money growth shocks. Structural vector autoregression (SVAR) and generalised method of moments (GMM) estimations confirm earlier findings in Snower (2005, 2008b) obtained from chain reaction structural models: the slope of the US Phillips curve is far from vertical, even in the long-run, which implies that the nominal and real sides of the economy are symbiotic. In the light of the significant and robust long-run inflation-unemployment tradeoffs, policy makers should reconsider the classical dichotomy thesis.

Abstract: Relating a technological concept such as a machine, which functions based on certain physical rules, with economy, in other words, an attempt to explain (demonstrate) an economic theory should be quite interesting. This study is an attempt to provide quite fundamental and practical information on the functioning of a machine produced about fifty years ago, the theoretical framework of which is constituted by the IS-LM model in an open economy. However, before this point, an outline of the relations between economy and many other social and natural sciences including physics, which may be considered quite distinct from economy, is provided as they become tangible thanks to this machine that works on a hydrodynamic principle.
Keywords: Hydraulic Keynesianism, the Phillips Machine
Jel: A12; A20; N00; D58; E27

The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper extends a small linear model of the Israeli economy to allow for nonlinearities in the inflation-output process that arise from convexity in the Phillips curve and endogenous monetary policy credibility. We find that the dynamic responses to shocks in the extended model more closely resemble features in the data from the period 2001−03. In particular, the extended model does a much better job in accounting for the deterioration in monetary policy credibility and the output costs of regaining monetary policy credibility once it has been lost. JEL Classification Numbers: C51, E47, E52, E58.

This paper chooses three Asian countries (Japan, South Korea and Malaysia) as case studies to examine the relationship between the Phillips curve and openness. The justification for the choice of these countries is that Japan is a moderately open economy while Malaysia is a highly open economy. South Korea is in-between these two extremes. The main finding of the present study is that as a country opens up to global market by increasing the amount of imports, the slope coefficient of the Phillips curve becomes smaller. In other words, the findings suggest that the Phillips curve tends to be flatter in more open economies.

OECD unemployment rates show long swings which dominate shorter business cycle components and these long swings show a range of common patterns. Using a panel of 21 OECD countries 1960-2002, we estimate the common factor that drives unemployment by the first principal component. This factor has a natural interpretation as a measure of global expected returns, which is given added plausibility by the fact that it is almost identical to the common factor driving investment shares. We estimate a model of unemployment adjustment, which allows for the influence both of the global factor and of labour market institutions and we examine whether the global factor can act as a proxy for the natural rate in a Phillips Curve. In 15 out of the 21 countries one cannot reject that the same natural rate, as a function of the global factor, appears in both the unemployment and inflation equations. In explaining both unemployment and inflation, the global factor is highly significant, suggesting that models which ignore the global dimension are likely to be deficient.

The paper studies the role of income distribution within a medium-scale macrodynamic model built in a Keynesian and Goodwinian tradition. Combining a wage and price Phillips curve, adjustments of an inflation climate, an IS relationship determining output, Okun's law for employment and the Taylor rule for monetary policy, a semi-structural model is obtained that incorporates the most important macroeconomic channels in a closed economy. After assessing the reasonable time series variabilities in stochastic simulations, a deeper analysis is concerned with the stabilizing and destabilizing effects of the model's parameters, and with a structural shift in income distribution. In many details of these investigations, the distinction between a wage-led and profit-led regime becomes important.

In this paper we formulate a disequilibrium AS-AD model based on sticky wages and prices, perfect foresight of current inflation rates and adaptive expectations concerning the inflation climate in which the economy operates. The model consists of a wage and a price Phillips curves, a dynamic IS curve as well as a dynamic employment adjustment equation and a Taylor-rule-type interest rate law of motion. Through instrumental variables GMM system estimation with aggregate time series data for the U.S. and the Eurozone economies, we obtain structural parameter estimates which support the specification of our theoretical model and show the importance of the inflationary climate, as well as of the Blanchard-Katz error correction terms, and indirectly of income distribution, in the dynamics of wage and price inflation in the U.S. and the Eurozone economies.

Bu çalışmada, Türkiye’de 2006-2017 döneminde enflasyon ve işsizlik oranları arasındaki uzun dönemli ilişki Fourier yaklaşımı ile incelenmiştir. Fourier yaklaşımına dayanan ekonometrik testler, serilerin etkisi altında bulunduğu yapısal kırılmaların sayısı, konumu ve formu ne olursa olsun güçlü sonuçlar vermektedir. İlk olarak, değişkenlere Fourier birim kök testi uygulanmış ve seviyelerinde durağan olmadıkları görülmüştür. Bunun üzerine, değişkenlerin farkı alınarak tekrar Fourier birim kök testi uygulanmış ve değişkenlerin birinci farkı alındığında durağan hale geldikleri tespit edilmiştir. Daha sonra, değişkenler arasındaki uzun dönemli ilişkinin varlığını sınamak amacıyla Fourier eşbütünleşme testi uygulanmış ve uzun dönemde işsizliğin enflasyonu etkilediği, fakat enflasyonun işsizliği etkilemediği bulunmuştur. Son olarak,  Dinamik En Küçük Kareler Yöntemi kullanılarak uzun dönemli katsayılar tahmin edilmiş ve işsizlik oranında meydana gelen 1 birimlik artışın uzun dönemde enflasyon oranında yaklaşık olarak 0.23 birimlik azalmaya neden olduğu tespit edilmiştir. Ulaşılan sonuçlar,  Türkiye’de Phillips eğrisinin geçerli olduğuna işaret etmektedir.

This paper evaluates the hypothesis that globalization has increased the role of international factors and decreased the role of domestic factors in the inflation process in industrial economies. Toward that end, we estimate standard Phillips curve inflation equations for 11 industrial countries and use these estimates to test several predictions of the globalization and inflation hypothesis. Our results provide little support for that hypothesis. First, the estimated effect of foreign output gaps on domestic consumer price inflation is generally insignificant and often of the wrong sign. Second, we find no evidence that the trend decline in the sensitivity of inflation to the domestic output gap observed in many countries owes to globalization. Finally, and most surprisingly, our econometric results indicate no increase over time in the responsiveness of inflation to import prices for most countries. However, even though we find no evidence that globalization is affecting the parameters of the inflation process, globalization may be helping to stabilize real GDP and hence inflation. Over time, the volatility of real GDP growth has declined by more than the volatility of domestic demand, suggesting that net exports increasingly are acting to buffer output from fluctuations in domestic demand.

Against the background of large fluctuations in world commodity prices and global growth, combined with ongoing structural changes relating to globalization, this paper examines some of the key factors affecting global inflation. The paper empirically investigates various relative price and structural impacts on global inflation by: estimating a GVAR to examine how oil price shocks feed through to core and headline inflation; calculating the impact of increased imports from low-cost countries on manufacturing import prices; estimating Phillips curves in order to shed light on whether the inflationary process in the OECD countries has changed over time, particularly with respect to the roles of import prices, unit labour costs and the output gap.